Wednesday, February 25, 2009

Has Michelle Obama Been Stiffing The IRS Too?

Michelle Obama Accepting Fashion Freebies

For years, the press excoriated Nancy Reagan for borrowing clothes and jewelry from designers. Yet Michelle Obama has been doing the same thing — without any outcry from the media.

Accountants say that the first lady’s practice of borrowing both clothes and jewelry raises major tax and disclosure issues, not to mention ethical questions.

“The transactions are clearly taxable,” says Richard Rampell, a Palm Beach, Fla., accountant whose clients include several of the island’s billionaires. “The designers are indirectly paying Michelle Obama to go and display their wares. And they get a huge economic value for it, just as if they were paying a model to do this. If they are paying her in this indirect way by lending her their clothes, then she is actually performing a service for the designer, and she should have to recognize as income whatever the value is of the clothes that she got.”

Aside from the tax implications, Obama is obligated to report the value of the clothes she has received free of charge on government forms mandated by the Ethics in Government Act.

The items Obama has either borrowed or received free have included a $17,313 pair of Loree Rodkin diamond earrings and clothes and gowns worth $1,000 to $6,000. In some cases, Michelle Obama’s representatives have said she will donate the items to the Smithsonian.

That makes no difference, Rampell says.

“If somebody gives her a dress and it’s worth $6,000, and she’s not expected to return it, then she has $6,000 worth of income, or she’s received a $6,000 gift,” he says. “I’m sure that the company is deducting the cost of that dress — the cost of manufacturing, the design, the materials and all that other stuff. And then when she gives it away to the charity, then she gets a charitable contribution for it.”

While some articles in the press have reported that the clothes or jewelry were given to her free of charge or lent to her, none has criticized Obama or compared her practices with Nancy Reagan’s. Instead, the articles have swooned over her fashion sense.

“All Hail the Leader of the Fashionable World” was the headline on a Jan. 21 Washington Post story. In the 14th paragraph the story mentioned that the diamond earrings had been lent to Obama. The story quoted Katie McCormick Lelyveld, the first lady’s press secretary, as saying she paid for her inauguration clothes. But a subsequent Feb. 12 New York Times story quoted the designers themselves as saying they did not charge the Obamas.

cont. here:

© Janet Crain

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